Benefit Study - Scenario 6SOUTH MIAMI PENSION PLAN
ACTUARIAL STUDY AS OF OCTOBER 1, 2010
- 1 -
EXECUTIVE SUMMARY
At the request of the City, we have completed ten (10) year projections illustrating the financial
impact of several proposed plan provisions for General Employees of the South Miami Pension
Plan.
Background – The Plan is currently open to future General Employees of the City.
General Employees are currently eligible for retirement benefits upon the attainment of age fifty-
five (55) with completion of ten (10) years of service.
The benefit accrual rate for General Employees is currently two and a half percent (2.50%) for
each year of credited service through September 30, 1999 and two and three quarters percent
(2.75%) for each year of credited service after October 1, 1999.
General Employees currently receive a supplemental benefit in the form of an annual cost of
living adjustment based on the consumer price index, not to exceed 3% annually.
Final Monthly Compensation (FMC) used to calculate the retirement benefits of General
Employees is currently the average of the final thirty-six (36) months of compensation during
employment with the City. Compensation shall mean regular wages and salaries including
overtime, excluding bonuses, vacation, sick leave and other additional compensation.
Proposed Changes – We understand the City wishes to determine the effect on current and
future City contributions of the following proposed changes in benefit provisions for General
Employees of the City.
Scenario 1 – The Plan is closed to future General Employees. Future General
Employees will enter a defined contribution plan, with General Employees contributing
7.0% of compensation and the City contributing a matching 7.0% of compensation.
Scenario 2 – The current accrued benefits of General Employees are frozen and payable
under the current terms of the Plan at the currently defined normal retirement date – the
later of attainment of age fifty-five (55) and completion of ten (10) years of credited
service.
Future benefit accruals, including increases due to increases in FMC, will be payable at
the proposed new normal retirement date – the later of attainment of age sixty (60) and
completion of ten (10) years of credited service.
Scenario 3 – The benefit accrual rate is reduced to two and a quarter percent (2.25%) per
year for future credited service.
SOUTH MIAMI PENSION PLAN
ACTUARIAL STUDY AS OF OCTOBER 1, 2010
- 2 -
Scenario 4 – The supplemental benefit (COLA) for General Employees is eliminated for
future benefit accruals, including increases in the current accrued benefit due to increases
in FMC. General employees will receive the supplemental benefit on their current
accrued benefit.
Scenario 5 – The definition of Final Monthly Compensation (FMC) is changed for future
benefit accruals to the average of the final sixty (60) months of basic compensation but
not less than current Final Monthly Compensation as of October 1, 2010. Basic
compensation excludes commissions, overtime pay, bonuses and any other forms of
additional compensation outside of base wages.
Scenario 6 – Combination of Scenarios 1 through 5 above.
Results – The table on the following page shows the current net City contribution (cost) and the
sum of the projected net City contributions (costs) over the next five (5) and ten (10) years for
the baseline (current Plan) forecast and for each Scenario described above separately and
combined as a dollar amount ($thousands) and as a percentage of projected covered payroll,
respectively.
As you may be aware, in the event that more than one change is being considered, it is important
to note results from separate projections cannot generally be added together to produce the total.
The total can be considerably different than the sum of the parts due to the interaction of various
Plan provisions, actuarial assumptions and actuarial methods with each other.
SOUTH MIAMI PENSION PLAN
ACTUARIAL STUDY AS OF OCTOBER 1, 2010
- 21 -
Scenario 6 – Combination of Scenarios 1 through 5.
The following Table shows the projected payroll and a comparison of the projected City costs
under the baseline forecast versus Scenario 6.
Fiscal(Combined)Cumulative
YearCoveredReduction inReduction in
End Payroll Dollar % of Pay Dollar % of Pay City Cost City Cost
20123,853,670639,69416.6%440,75711.4%198,937198,937
20134,053,710747,93518.5%516,82512.7%231,110430,047
20144,252,793801,20918.8%562,45513.2%238,754668,801
20154,451,506837,35318.8%577,98113.0%259,372928,173
20164,646,915871,74318.8%590,74312.7%281,0001,209,173
20174,849,355910,31418.8%607,53612.5%302,7781,511,951
20185,049,164947,14518.8%621,77412.3%325,3711,837,322
20195,263,555985,05818.7%635,15012.1%349,9082,187,230
20205,470,0841,022,76918.7%649,06811.9%373,7012,560,931
20215,640,2151,053,00018.7%657,48311.7%395,5172,956,448
5 Year
Totals21,258,5943,897,9342,688,7611,209,173
10 Year
Totals47,530,9678,816,2205,859,7722,956,448
Projected City CostProjected City Cost
Current PlanScenario 6
SOUTH MIAMI PENSION PLAN
ACTUARIAL STUDY AS OF OCTOBER 1, 2010
- 22 -
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SOUTH MIAMI PENSION PLAN
ACTUARIAL STUDY AS OF OCTOBER 1, 2010
- 23 -
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SOUTH MIAMI PENSION PLAN ACTUARIAL STUDY AS OF OCTOBER 1, 2010
- 6 -
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5
.
3
%
1
2
.
7
%
9
8
4
,
4
7
5
9
.
0
%
7.
0
%
6
9
2
,
9
0
0
1
5
,
1
6
0
,
4
4
7
10
Y
e
a
r
To
t
a
l
s
4
7
,
5
3
0
,
9
6
7
8
,
8
1
6
,
2
2
0
5,
8
5
9
,
7
7
2
2,
9
5
6
,
4
4
8
30
Y
e
a
r
To
t
a
l
s
2
1
2
,
3
2
9
,
2
1
4
3
8
,
2
5
6
,
9
6
5
23
,
0
9
6
,
5
1
8
15
,
1
6
0
,
4
4
7
Pr
o
p
o
s
a
l
Pr
o
j
e
c
t
e
d
C
i
t
y
C
o
s
t
Pr
o
j
e
c
t
e
d
C
i
t
y
C
o
s
t
C
u
r
r
e
n
t
P
l
a
n